Walleye trims equities, plans to send about $2 billion back to clients

What happened

Walleye Capital told clients on Nov. 5 that it plans to send back about $2 billion as part of a cutback in equities trading. According to a person familiar who requested anonymity because the details are private, the multistrategy firm, with total assets of about $17 billion, intends to reduce hedge fund capital to roughly $10 billion, near its level at the beginning of the year.

That person said Dockside, Walleye's separately managed accounts business, will continue to oversee an additional $5 billion. A Walleye spokesperson declined to comment.

Bloomberg reported that head of equities Anil Gondi was let go, along with a "substantial" portion of the equities teams, as the firm revamps its internal stock-trading operation.

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Strategy shift and staffing

Chief Investment Officer Will England told clients the firm is "going to lean into the businesses where we have a proven and differentiated right to win, including our Volatility, Quant and external businesses." He also said Walleye is not quitting equity long or short trading, but its "competitive advantage" does not lie in attempting to mirror the traditional multi-manager stock-trading approach.

The plan is to keep equity exposure by allocating to external managers and backing a set of its "highest conviction" internal stock pickers. As part of that effort, the person said Mike Scheer - formerly a Jain Global portfolio manager focused on stock picking - will join to report directly to England.

The bigger picture and performance

The competitive backdrop is dominated by giants like Millennium Management and Citadel that have drawn heavy investor interest and spent aggressively on talent. With many of those leaders closed to new capital, challengers such as Walleye have expanded too, as the firm's assets increased from roughly $4 billion as 2023 came to a close.

Performance has been a pressure point. In October, Walleye fell 5.9%, leaving its year-to-date loss at 6.8% as of the end of last month. In plain English: the firm is concentrating on businesses it says give it an edge, which could change the risk and return mix your capital sees if you invest alongside it.

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